Site Mobile Navigation

Will Canada Open Border To Investors?

Canada's industry minister said today that the government would review the country's limits on foreign ownership of communications companies and consider changing them to encourage investment and competition.

Any such change is sure to be debated intensely. The limits are widely seen as an important defense of national sovereignty and of a distinct Canadian culture against domination by American or other foreign companies.

Current law limits foreign owners to one-third of the voting stock of telecommunications holding companies and one-fifth that of operating companies.

Those calling for looser limits say that greater access to foreign capital would help fledgling rivals to compete more successfully against Bell Canada, which remains a near-monopoly in many segments of the telephone industry nearly a decade after deregulation. Bell Canada is owned by BCE of Montreal.

Opponents say that relaxing the rules in the phone industry will increase pressure on the government to do the same in cable TV, broadcasting and publishing. Opening these sectors to greater foreign ownership, they fear, would turn out to mean handing over Canadian culture to giant media multinationals, especially American ones.

The telecommunications companies are supervised by the government's department of industry, while the broadcasters, publishers and cable TV companies come under the Canadian heritage department. The heritage minister, Sheila Copps, is an outspoken opponent of changes to the foreign ownership limits.

Two big players in Canada have feet in both camps. BCE has extensive media interests, including CTV, the biggest private television network, and The Globe and Mail, a Toronto-based national daily. Rogers Communications, the controlling shareholder in a cellphone venture with AT&T, is also the country's largest cable TV operator, a major magazine publisher and the owner of several TV and radio stations.

BCE is in the process of buying back the 20 percent of Bell Canada it does not already own from SBC Communications.

An error has occurred. Please try again later.

You are already subscribed to this email.

In his announcement today, the industry minister, Allan Rock, said the ownership policy review by the House of Commons committee on industry, science and technology would be completed in February.

A background document issued by Mr. Rock's department said that in the telecommunications industry, capital ''is not easy to come by'' after the dot-com crash and recent problems in the sector. The government, the document says, ''recognizes that it is time to re-evaluate whether the current approaches represent the most effective means of achieving balanced policy objectives in the telecommunications sector.''

Kenneth Engelhart, vice president for regulatory affairs at Rogers Communications, said that the review should be extended to include cable operators, because they increasingly compete head-to-head with phone companies, for example in providing high-speed Internet access. Rogers offers it over its cable network, while Bell Canada offers a phone-line-based service.

''If you have different regulatory rules, you have one competitor having an advantage over the other,'' Mr. Engelhart said.

But Jon Arnold, a Toronto telecommunications analyst at Frost & Sullivan, a consulting firm, said a change in the rules would accomplish little. While the government was ''trying to support a competitive environment here,'' Mr. Arnold said, the Canadian telephone market was ''just too small'' to support the many companies that have tried to challenge Bell's dominance. ''The companies all had opportunities to build networks, but they got nowhere,'' he said. ''Bell Canada is impregnable.''

Mr. Arnold said: ''If you allow foreign ownership, you risk losing the nuts and bolts of your economy. Is that what we want? I don't think so.''